Pontiac retirees move to block cancellation of their health insurance

A group of Pontiac retirees are asking a judge to halt the cancellation of their health insurance, set to take effect Labor Day weekend.

Wednesday's motion comes just days after the retirement of former Emergency Manager Lou Schimmel. The two-year budget he left behind hinges on the elimination of health insurance for about 1,200 retirees, a $6 million annual expense.

"Given the lethal potential of the city's disastrous plan, the harm to retirees significantly and clearly outweighs any financial burden that faces the city," City of Pontiac Retired Employees Association attorney Alec Gibbs wrote of the Sept. 1 cutoff date for retiree health care.

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The benefits cut -- including medical, dental and life insurance -- was approved by the state Emergency Loan Board in July for a period of two years in lieu of a counterproposal by the Pontiac City Council that pitched a complicated transfer from the Pontiac General Employees Retirement System to pay for health care benefits.

The city is maintaining a group insurance pool in which retirees can participate. The annual deductibles for the Blue Cross Blue Shield GlidePath insurance range from $500 to $3,000 and premiums range from $433.47 a month for a single retiree purchasing high-deductible insurance to $1,927.70 a month for a retiree purchasing insurance with a $500 annual deductible for a family of three or more.

The retirees' lawsuit alleges that Schimmel's plan to provide a $400 monthly pension benefit increase to retirees is a diversion of pension assets to pay for a city obligation and therefore illegal.

The pension benefit increase is, before taxes, more than the $362 monthly cost of supplemental Medicare Advantage insurance. About 60 percent of the city's retirees are Medicare-eligible.

The suit was brought by the City of Pontiac Retired Employes Association, as well as pension board trustee and former Mayor Walter Moore and his fellow trustee Janice Gaffney. The city and Schimmel are named as defendants.

Schimmel has argued that the pension board, which oversees 150-percent funded retirement system with $450 million in assets, should vote to dissolve, join the state Municipal Employees Retirement System at a 120 percent funding level and use the remainder of its surplus to preserve retiree health care.

Last November, a millage proposal floated by Schimmel to pay for retiree health care was rejected by voters. The former emergency manager has said the city will be bankrupted if the benefits are not set aside.

Retiree Beverly Stubbs signed an affidavit stating that she suffers from multiple health problems and depends on health care and prescription drugs to live.

"Without the coverage, I cannot afford to pay for my medical treatment and continue to pay for basic necessities," Stubbs said in the affidavit.

The emergency motion for a temporary restraining order was filed in a broad case before Oakland County Circuit Judge Phyllis McMillen that began as a successful challenge to Schimmel's reorganization of the Pontiac General Employees Retirement System board, blocked when Oakland County Circuit Judge Rae Lee Chabot granted a preliminary injunction.

The lawsuit later targeted the city's $7.9 million payoff to Oakland County of bonds owed on the Phoenix Center, arguing the money should have been used to pay for retiree benefits. The bond payment, which had the effect of transferring the ownership of the Phoenix Center from the county back to the city, was made June 1.

Chabot recused herself from the case after Oakland County, then a defendant in the lawsuit, retained Dickinson Wright as its counsel. Chabot's husband works at the firm. The case was reassigned to McMillen.